Putin lowers EU-style ambitions with economic pact

May 29, 2014
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From left:,Belarus President Alexander Lukashenko, Kazakhstan's President Nursultan Nazarbayev and Russian President Vladimir Putin pose for a photo after they agreed to create the Eurasian Economic Union, an alliance intended to further boost economic and trade ties between the ex-Soviet neighbors in Astana, Kazakhstan, on May 29. / Mikhail Klimentyev, AP

by Anna Arutunyan, Special for USA TODAY

by Anna Arutunyan, Special for USA TODAY

ASTANA, Kazakhstan - Russia, Belarus and Kazakhstan signed an economic pact Thursday that forges closer trade and labor ties among the former Soviet republics.

While the pact fell short of creating the eastern-style European Union it was touted to be, the new Eurasion Economic union, nonetheless, advances Russian President Vladimir Putin's ambitions to reassemble former Soviet republics into a closer federation, if not one nation again.

"Today, we are creating a powerful and attractive center of economic development, a major regional market bringing together over 170 million people," Putin said during talks in Kazakhstan's capital, Astana, where he later signed a deal to create the Eurasian Economic Union.

The union takes effect next year and will have a combined economic output of $2.2 trillion a year, or about one-eighth the size of the combined output of the 28-member European Union. In addition to free trade, it coordinates the members' financial systems and regulates industrial and agricultural policies along with their labor markets and transport systems. The deal stops short of introducing a single currency, such as the euro, and delays a common energy market.

This past winter, Putin had pushed for Ukraine, also a former Soviet Republic, to join the bloc. But the plan suffered a setback after pro-Western protests in Ukraine led to the toppling of the government of staunch Putin ally Viktor Yanukovych over his attempt to forge closer ties with Russia and push away economic overtures from European neighbors in the West.

Russia subsequently seized Crimea from Ukraine, and pro-Russian separatists in eastern Ukraine are battling central government forces of newly elected President Petro Poroshenko, who has pledged closer relations with the West and talks with Putin on a diplomatic solution to the tensions between their countries.

On Thursday, Belarus' authoritarian President Alexander Lukashenko, who has depended on cheap Russian energy and other subsidies to keep his nation's Soviet-style economy afloat, said it was unfortunate that Ukraine was not joining the group.

"I'm certain that sooner or later the Ukrainian leadership will realize where its fortune lies," said Lukashenko, implying that Ukraine would be better off allied with Russia.

Alexander Konovalov, who runs the Moscow-based Institute of Strategic Assessments, an NGO that promotes democracy and the rule of law in Russia, said that setting up a Eurasian Union that could eventually rival the EU and the United States is Putin's dream. "What's important for him (Putin) is this image as the collector of Russian lands," Konovalov said.

Russian and Kazakh officials meanwhile insisted the union was purely economic and would have no political components, such as an envisioned parliament. "We fought over every letter of the agreement to make sure there was no political integration," Bakytzhan Sagintayev, Kazakhstan's first deputy prime minister, told USA TODAY in an interview Thursday.

"If Russia wants anything in the agreement, it needs our consent," Sagintayev said. "During the Soviet Union, no one asked us, they just called us over to Moscow, handed us a paper and told us what to do."

Experts said that while skepticism about the union grew as a result of the crisis in Ukraine, which continues to deal with the fallout from civil unrest in its eastern regions that led to Russia's annexation of Crimea and ongoing skirmishes with other separatist groups, there was long reluctance from Kazakhstan and Belarus to make the association anything more than economic from the very beginning.

"Belarus and particularly Kazakhstan do not want political integration," says Sergei Utkin, a political and foreign policy analyst with the Russian Academy of Science. "If the Ukrainian crisis had any effect it was to strengthen this position."

Energy-rich Russia currently has little leverage over Kazakhstan, whose energy riches and booming economy make it an equal partner. For Belarus, it is dissatisfied with duties for Russian oil processed at its refineries. Both nations are wary of domination from Moscow.

Still, Karim Arginbayev, an Astana-based investor who attended the signing on Thursday, said that for Belarus and Kazakhstan the alliance with Russia was a geopolitical necessity. "Before (Ukraine) there was a global process, now there is more confrontation (between Russia and the U.S.) We have to choose. We can't deal with both sides anymore."

However, officials from both the Kazakh and the Russian side denied that Ukraine had anything to do with curbing the political aspects of the union. "The Ukrainian crisis is about its own self-determination and how it identifies its place in the world," said Viktor Khristenko, the union's Russian chairman.

"But it did give a signal that we can't get by in this world without serious integrational structures," Khristenko said.